Hong Kong loses 'world's freest economy' title to Singapore

March 18, 2020 13:10
Social unrest and perceived erosion of autonomy have pulled Hong Kong from its long-standing perch as a top place to do business in the world. Photo: Bloomberg

Hong Kong has lost its crown as the world's freest economy, losing the title for the first time in 25 years, following months of social unrest last year, as per a closely-watched annual survey from a prominent US think tank.

In the latest Index of Economic Freedom report from Heritage Foundation, Hong Kong has dropped to the No. 2 spot, with Singapore taking the top honors.

It marked the first time Hong Kong has lost the freest economy title since the survey was launched in 1995.

Among the 186 economies surveyed by Heritage Foundation, a conservative think tank based in Washington, Hong Kong scored 89.1 points, down 1.1 points from the previous year.

By comparison, Singapore's score stood at 89.4, which, although unchanged from last year, was higher than all the other economies.

China was ranked No.103 as it is considered a "mostly unfree" economy.

According to the report, Singapore beats Hong Kong in many of the 12 quantitative and qualitative “freedom” factors covered by the index, including "judicial effectiveness", "property rights", "government integrity" and "government spending".

"Fiscal health" was the only category where Hong Kong did much better than its regional rival.

It can be seen in the report that Hong Kong's slippage in the ranking was mainly due to a significant drop in the category of "investment freedom", for which the city saw its score fall 10 points to 80.

Without giving detailed explanations on why, the think tank only said that the result stemmed from heightened uncertainties related to security issues, which caused damage to the originally favorable investment environment in Hong Kong.

The think tank specifically noted that the Hong Kong government's proposal last year to amend the fugitives law severely threatened the city's judicial independence and also sparked persistent social and political unrest.

"Hong Kong's economy was rated the freest in the world from 1995 through 2019. The ongoing political and social turmoil has begun to erode its reputation as one of the best locations from which to do business, dampening investment inflows," the report said.

Furthermore, the Heritage Foundation expressed concern that the increasingly close links between Hong Kong and mainland China in trade, tourism and finance has changed the city's economy that is traditionally proud of being open and led by free market.

The risk to Hong Kong's economic freedom has risen, even though the city continues to be one of the most important financial and trade hubs in Asia, it said.

In response to the report, the Hong Kong government said in a statement that it is disappointed by the drop in the ranking.

But it welcomed the think tank's recognition of the city's strengths as a global financial center with a high degree of competitiveness and openness, and said it is gratifying to note that Hong Kong attained the highest score among the assessed economies in terms of "fiscal health", "business freedom", and "trade freedom".

A government spokesman pointed out in the statement that "Hong Kong faced some unprecedented challenges in 2019…the high level of civil disobedience, acts of vandalism and intimidation of people holding a different political standpoint have inevitably tarnished Hong Kong's reputation as a safe and orderly place."

The Hong Kong government condemns such acts of violence and is determined to deal with them in strict accordance with the law, the spokesman said.

"While the local social unrest and turbulence in the past year, and how these were perceived overseas, might have affected Hong Kong's score in the investment environment, we must stress that Hong Kong's institutional strengths are unscathed and our underlying fundamentals remain strong." 

Dismissing the US think tank's concern, the spokesman stressed that under the "one country, two systems" principle, Hong Kong's capitalist system, free economy and trusted legal system remain as robust as ever.

Free flow of capital within, into and out of Hong Kong is guaranteed and Hong Kong residents continue to enjoy a wide array of freedoms, including freedom of speech, of the press, of assembly and of demonstration, he said.

"With the further opening up and deepening of economic reform in the Mainland, Hong Kong is poised to be both a 'facilitator' and a 'beneficiary' of important national development strategies and such integration with the Mainland through trade, tourism and financial links will not erode Hong Kong's freedoms," the spokesman said.

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